In response to Japan’s declining population outside of Tokyo, Ryobi Holdings Co., a longstanding bus route operator, is taking an innovative approach to secure its future. The company, which has served rural Japan for over a century, is venturing into the financial sector by establishing an AI-powered hedge fund specializing in foreign exchange (forex).
Strategic Shift in Response to Population Decline
Ryobi’s move is driven by the pressing need to address the significant demographic changes affecting rural areas. Founded 114 years ago as a short railway service in Okayama Prefecture, the company now faces the harsh realities of Japan’s aging population. In 2022, over 30% of Okayama’s residents were aged 65 or older, with some towns at risk of disappearing by 2050. To adapt, Ryobi has diversified its investments, branching into real estate, supermarkets, and now, financial services.
Leadership and Expertise
To lead this new venture, Ryobi has recruited Kyosuke Suzuki, a seasoned currency trader with experience at Societe Generale SA. Suzuki was brought on board by Ryobi President Toshiyuki Matsuda, with whom he previously worked at Sumitomo Trust & Banking Co., now part of Sumitomo Mitsui Trust Holdings Inc. Suzuki’s mission is to set up the hedge fund, under the umbrella of Ryobi’s subsidiary, Ryobi Systems Co., by the end of the year, with operations expected to begin in early 2025.
Testing and Development of AI Models
Over the past 18 months, Suzuki and a team of five Ryobi engineers have been rigorously testing the fund’s AI models. With ¥300 million ($2 million) of Ryobi’s capital, they conducted a series of currency transactions to evaluate the models’ stability and profitability. “No matter how good the simulation is, it’s meaningless if you can’t win in actual trading,” Suzuki said, emphasizing the challenges in developing a reliable trading system.
Fund Structure and Initial Goals
The hedge fund is being structured as a private investment trust, targeting institutional investors, professionals, and a select group of fewer than 50 high-net-worth individuals. Suzuki aims to raise approximately ¥5 billion in the first year, primarily from local business owners and financial institutions. “We would like to start small,” he noted, highlighting the cautious but strategic approach.
Future Aspirations in Financial Technology
Ryobi’s information and communication technology division, to which Ryobi Systems belongs, has already proven to be a strong revenue generator, contributing nearly half of the group’s total ordinary income in the past year. Ryobi Systems also competes in the software market, offering products like tax payment systems to regional municipalities, against major players such as Hitachi Ltd. and Fujitsu Ltd.
Looking ahead, Suzuki envisions broader applications for the AI systems being developed. He sees potential in offering these systems to banks or providing investment advice and other financial services. However, he stresses that the immediate priority is ensuring the hedge fund’s success. “But for that to happen, we need to first make the fund a success,” Suzuki said.
This strategic shift underscores Ryobi’s commitment to innovation as it navigates the challenges posed by Japan’s demographic trends.
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